From tactical to strategic procurement

 STUDENT ID No: 00574229

MODULE CODE:  CRN  53277 / 53279 / 53272

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MODULE TITLE:  

Procurement and Contract Management

ASSIGNMENT TITLE:

From Tactical to Strategic Procurement

MODULE COORDINATOR:    Dr Kostas Chaldoupis

WORD COUNT:  3280  without Bibliography and table of content

DEADLINE DATE:   27th March 2020

Table of Contents

1. Abstract        3

2. Introduction        3

3.The Company Background        4

3.1The Challenge        4

3.2The Approach        4

3.3 Outcome        5

4.0 Literature Review        5

4.2 New Skills Requirement        7

5.0 Moving Kingsway Ltd. towards Strategic Procurement        7

5.1 Strategic Management Implementation Process        8

5. 3 Sourcing Strategies        11

5.4 Suppliers’ Relationship Portfolio: Frameworks and Models        11

5.5 Kraljic’s Model        12

5.5 .1Strategic Items        12

5.5 .2Bottleneck Items        12

5.5 .3 Leverage Items        13

5.5 .4 Non-Critical Items        13

5.6 Bensaou’s Model        14

6.0        Conclusion        15

Bibliography        16

1. Abstract

The procurement and supply chain literature are replete with works detailing how the purchasing function has evolved from being a boring mind-numbing clerical role to one of strategic importance. But that is fast changing and there is empirical evidence to this effect- it is gaining prominence by becoming involved in ‘strategic partnerships, cooperative alliances and supply network management.’ (Lamming & Cox, 1999)

It is now clear that procurement is an important part of any organizations and as such cannot be ignored or relegated to the background if they want to achieve competitive advantage.  (Lamming & Cox, 1999;Quayle, 2005; Rajagopal & Bernard, 1993;Tassabehji & Moorhouse, 2008)

It isn’t the tactical and low-level activity it was thought to be. (Tassabehji & Moorhouse, 2008; Cox, 1996). It was against that this paper is written to critically examine how companies looking for further savings and value adding opportunities could do so through the transformation of their procurement function.

Consequently, this paper is written using in the light of procurement transformation case study at a GSE listed firm. Applying theory to the case study, the author looked briefly at the existing literature on procurement and then moved onto examine the procurement function and sourcing methods. How procurement restructuring can be exploited to compensate for external turbulences in the markets is also looked at. Essentially the author has shown that companies looking to harness the full power of the procurement function to have make the transition from purchasing to strategic procurement or supply management.

Keywords:  Purchasing, Strategic Procurement, Sourcing Strategies, Competitive Advantage

2. Introduction

According to the Chartered Institute of Purchasing and Supply (CIPS), procurement expenditure sometimes exceeds 70% of most companies spend. Therefore, any small reductions in procurement cost can translate into increased profit. Consequently, organisations both in the public and private sector are beginning to re-examine their procurement function for cost savings.  This has not always been the case, because in the past procurement was seen as a low-level support role rather than strategic. (Canie & Gelderman, 2005; Tassabehji & Moorhouse, 2008)

In this paper, I will demonstrate how firms (private and public) can take steps to elevate procurement to strategic position. Doing so will enhance profitability by minimizing waste and associated cost in the value chain. It will require re-examination of their supply base, sourcing methods, and establishing collaborative relationships with external resources and supply markets. 

The paper commences with an examination of the status of the procurement role to expose its contested nature both as function and a concept.

After the literature review, I through a company case study, outline the procurement transformation process and the strategic management tools and theories employed in the transformation process. How sourcing methods, relationship management and risk management can be exploited to compensate for external turbulences in the markets is also discussed. Essentially, I hope to show that companies looking to unearth the value of the procurement function to have make the transition from purchasing to strategic procurement.

3.The Company Background

The client is Ghana’s leading Supermarket and a leading GSE company. It was privatised 5 years ago. The organisation is now looking to its procurement function to for efficiency savings. They want to transform their Procurement so that the function can be a source of competitive advantage.

3.1The Challenge

The company has engaged Accenture Consulting to lead an organisation-wide procurement transformation programme with a targeted procurement savings of not less than $10m be realised in 2 years. 

3.2The Approach 

Through several workshops and meetings with stakeholders, a compelling case for change has been establish and a realistic value-creating solution agreed which supports the organisations vision. A roadmap to execute the transformation based on changing the mindset. behaviour, culture, and perception towards procurement department was developed aimed at addressing the following:

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